Regulating Trading Practices
Andreas M. Fleckner
Max Planck Institute for Comparative and International Private Law; Max Planck Institute for Tax Law and Public Finance
Oxford University Press, The Oxford Handbook of Financial Regulation, Forthcoming
High-frequency trading, dark pools, front-running, phantom orders, short selling — the way securities are traded ranks high among today’s regulatory challenges. It has become commonplace, both in financial and in academic circles, to call for the government to intervene and impose order. From a historical and comparative perspective, however, many of the recent developments look less dramatic than some observers believe. This is the essence of the present chapter. It explains how today’s regulatory regime evolved, identifies the key rationale for governments to intervene, and analyzes the rules, regulators, and techniques of the world’s leading jurisdictions. The chapter’s central argument is that governments should focus on the price formation process and ensure that it is purely market-driven. Local regulators and self-regulatory organizations will take care of the rest.
Number of Pages in PDF File: 53
Keywords: stock exchange, securities trading, standardization, self-regulation, state intervention, price formation, price discovery, algorithmic trading, short selling, market fragmentation
JEL Classification: D47, G14, G15, G18, G23, G28, K22, N20, N40
Date posted: August 8, 2014 ; Last revised: July 24, 2015
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